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    The IRS Position On Cost Segregation

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    Expert costseg
    In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods

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    The IRS Position On Cost Segregation

    Uploaded by

    Expert costseg
    93 views8 pages
    In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods

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    The IRS Position on Cost Segregation

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    In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    93 views8 pages

    The IRS Position On Cost Segregation

    Uploaded by

    Expert costseg
    In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    The IRS Position

    O n C o st Se g r eg a t io n

    Ta x R e d u c t i o n E x p e r t s www.expertcostseg.com
    Background
    “In order to calculate depreciation for Federal income
    tax purposes, taxpayers must use the correct method
    and proper recovery period for each asset or property
    owned.

    Property, whether acquired or constructed, often consists


    of numerous asset types with different recovery periods.

    Thus, property is typically separated into individual


    components or asset groups having the same recovery
    periods and placed-in-service dates to properly compute
    depreciation.”
    Here Is What The IRS Says
    About Cost Segregation

    “To calculate depreciation for Federal income tax


    purposes, taxpayers must use the correct method
    and proper recovery period for each asset…”

    The primary means of “determining the proper recovery


    period” is by conducting a cost segregation study.

    The purpose of a cost segregation study is to identify the


    value of assets with varying lives, typically 5, 7, 15, 30 and
    40 for real estate.
    The 2017 Tax Cuts and Jobs Act
    The 2017 TCJA magnified the benefits by allowing ALL 5-, 7-, and 15-year life property to be
    depreciated in year one.

    This made it typical for 20 to 50% of the total cost of the real estate to be depreciated
    in year one.
    Here Is An Example Before and After
    2017 Jobs Act
    Let’s consider a standard commercial office building with a depreciable basis
    of $4,000,000 purchased in September of 2019. The investor is in the 37% tax
    bracket. Before the Tax Cuts and Jobs Act the depreciation resulting from a cost
    segregation study would have looked like this:

    Without Cost Segregation (Straight-Line)


    Without Cost Segregation (Straight-Line)
    Use of a cost segregation study would have significantly enhanced his tax and
    cash flow position as follows:
    With Cost Segregation (Including TCJA)
    After the passage of the Tax Cuts and Jobs Act of 2017, and with the utilization
    of cost segregation, take a look at the difference:

    Over $1.1 million in additional depreciation in year one!!


    Eliminate Federal & State Income Taxes
    With Cost Segregation!

    Determine Your First Year Federal Income Tax Savings!

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